Miriam Butler , et al. v. The Travelers Home and Marine Insurance company, et al.
The Supreme Court of South Carolina recently held that an insurer could depreciate embedded labor costs when calculating actual cash value where the policy did not define the term. The underlying case, certified as a question of state law by a federal district court, involved a house fire. The underlying policy language simply referred to “Actual Cash Value” and “Replacement Cost Value” without providing an exact definition or method of how Travelers must calculate ACV. Travelers calculated the ACV in this case by determining the RCV and subtracting depreciation for materials and labor. Instead of challenging Travelers on the proper ACV of the damaged property, the insureds chose to frame the issue in terms of how Travelers calculates its offer. The court therefore ruled that South Carolina law does not prohibit Travelers from the common industry practice of including an estimate of depreciation of embedded labor costs in its calculation ACV when the term is not defined in the policy, and did not address the adequacy of Travelers’ ACV offer.